Assault on the Free Market

A serious political battle is taking place in America. It is a battle over economic freedom. Last December 7, during an address delivered at Osawatomie High School in Osawatomie, Kansas, President Obama spoke of a “certain crowd in Washington” who believe “the market will take care of everything….” Of course, there is hardly anyone in Washington who says they believe this – because few could win election with such an idea. After all, both political parties support the welfare state. We might try and find a congressman or senator who would say the market will take care of everything, but we cannot. Yet it serves the president to set up a straw man in order to prevail on a point of principle.

According to Obama, the pro-free-market-view goes something like this: “If we just cut more regulations and taxes, especially for the wealthy, our economy will grow stronger. Sure, they say, there will be winners and losers. But if the winners do really well, the jobs and prosperity will eventually trickle down to everyone else.” Quite naturally the president does not agree with trickle down economics. He calls this “a simple theory” that “speaks to our rugged individualism and our healthy skepticism of too much government … and it fits well on a bumper sticker. But here’s the problem,” says the president. “It doesn’t work. It has never worked.”

Of course, President Obama is mistaken. Readers are encouraged to watch Milton Friedman’s documentary, The Power of the Market, which testifies to the market’s ability to lift people out of poverty – without regulations and without welfare. As for government’s ability to solve economic problems, one only has to consider the economic history of the Soviet Union. Another example would be from American history, when the U.S. government strangled businesses during the Great Depression without achieving anything positive. Only with the elimination of New Deal programs during World War II did the U.S. economy recover.

Austrian economist Ludwig von Mises, in his book Liberalism in the Classical Tradition, wrote a section titled “Private Property and its critics” in which he reminded readers that the earth “is no paradise.” Surviving and prospering is not easy, and requires individual effort. “The foundation of any and every civilization,” argued Mises, “is private ownership of the means of production.” Everyone wants to enjoy the fruits of their own labor – and property rights make this possible. But there is a hitch, Mises noted, “What is always criticized in the capitalist system is the fact that the owners of the means of production occupy a preferential position. They can live without working.”

Such appears to be President Obama’s position, to which Mises replies: “The capitalist can keep his favored position only by shifting the means of production to the application most important for society. If he does not do this – if he invests his wealth unwisely – he will suffer losses, and if he does not correct his mistake in time, he will cease to be a capitalist, and others who are better qualified for it will take his place.” As it happens, successful capitalists are rich because they have made the right economic choices. If they had not made the right economic choices, they would have lost their money long ago. As Mises points out, “In a capitalist society, the deployment of the means of production is always in the hands of those best fitted for it; and whether they want to or not, they must constantly take care to employ the means of production in such a way that they yield the greatest output.” (This is how our standard of living has increased during centuries of capitalist production.)

The enemies of the market today are not especially knowledgeable about economics. Their business is politics, and their natural tendency is to extend their own power. As Mises tells us, “To control everything, to leave no room for anything to happen of its own accord without the interference of the authorities – this is the goal for which every ruler secretly strives.” [p. 67] In a complex industrial society, adds Mises, “it is quite possible for those in control of the government to take action against private property. In fact, politically there is nothing more advantageous for a government than an attack on property rights, for it is always an easy matter to incite the masses against the owners of land and capital.”

This is what we face today, and why the chances for a near-term economic recovery are so grim. Though President Obama denies being a socialist, his Osawatomie speech was unambiguous. His statement clearly implies that private ownership of the means of production does not serve the public interest, and the government is duty bound to redistribute wealth. Private ownership of the means of production “does not work,” he says. Government intervention is needed. Already Obama’s government is taking over health care, has intervened in the auto industry, and has placed the energy sector under siege.

In 1898 Gustave Le Bon acknowledged that the victory of socialism appeared inevitable. Writing in The Psychology of Socialism Le Bon explained what the victory of socialism would bring: “The immediate fate of the nation which shall first see the triumph of socialism may be traced in a few lines,” he wrote. “The people will of course begin by despoiling and then shooting a few thousands of employers, capitalists and members of the wealthy class…. Intelligence and ability will be replaced by mediocrity. The equality of servitude will be established everywhere.” And so it happened, nearly twenty years later, that a socialist commonwealth was established in Russia under Vladimir Lenin. Le Bon accurately predicted, “It will be hell, a terrible hell….” He further added that “A man is not a socialist without hating some person or thing…. Servitude, misery, and Caesarism are the fatal precipices to which all the roads of the socialists lead.”

And so America now attends to the socialist path. We are not the first to descend into darkness. And we shall not be the last. As Milton Friedman said in his documentary, “Human and political freedom has never existed and cannot exist without a large measure of economic freedom.”